Tax and National Insurance changes 2025-26

The latest budget introduces several key changes to National Insurance (NI) and taxation policies that will impact employers and employees alike.

Here’s a summary of the most notable updates effective from April 2025:

• The rate of employer’s National Insurance Contributions (NICs) will rise by 1.2%, bringing it to 15%.
• The Employer’s NI Secondary Threshold will decrease from £9,100 to £5,000. This change, alongside the rate increase, means a higher NI burden for many businesses.
• The Employment Allowance will increase from £5,000 to £10,500, and the current £100,000 threshold for eligibility will be removed. All other eligibility requirements remain unchanged.
• Income tax and NI thresholds, currently frozen, are not set to extend beyond the 2028/29 fiscal year.
• Employer’s NI relief for employing veterans has been extended for an additional fiscal year, continuing the support for businesses employing veterans.
• Lower Earnings Limit (LEL) and Small Profits Threshold will increase by 1.7%, following September’s Consumer Price Index (CPI) rate, beginning in the 2025/26 tax year.
• The Married Couples Allowance and Blind Person’s Allowance will be uprated by 1.7% starting from 6 April 2025.

These changes will raise employment costs for many businesses, particularly due to the combined effect of the increased Employer NI rate and lowered Secondary Threshold. However, smaller employers will see some relief with the increased Employment Allowance and removal of the eligibility threshold, allowing more businesses to offset costs.

The increased Employer NI rate also highlights the potential benefits of salary sacrifice schemes, such as those for pension contributions, which become more appealing under higher NI rates.

Although these threshold increases won’t take effect immediately, the anticipated changes offer a sense of stability for employees, with the promise of higher thresholds in future tax years. However, employers may wish to manage expectations, as the adjustments will be phased in gradually over the coming years.